India’s manufacturing output
contracted sharply in August, prompting economists to warn the country’s ailing
economy had not reached the bottom of its slowing cycle. It was for the first
time in four years that Indian manufacturing has contracted.
The currencies of
India and other emerging markets, including Brazil, Indonesia and Turkey,
have fallen sharply as international investors shift capital to newly
attractive US assets ahead of the anticipated “taper” of the US Federal
Reserve’s programme of quantitative easing through the buying of bonds.
Manmohan Singh, Indian prime minister, urged the developed world to help
emerging markets by managing an “orderly exit” from the monetary easing
policies that have flooded the world with liquidity since the 2008 financial
Moody’s Investors Service Inc. has put India on notice,
warning that the country’s sovereign rating outlook will depend on the depth
and extent of the current economic downturn and the trends in the balance of
an unexpectedly detailed and wide-ranging briefing, Rajan outlined plans to
attract more funds from overseas by subsidising hedging costs for banks and
making it easier for importers and exporters to hedge currency risk.
Bank of India (RBI) expressed its displeasure on home loan products such as the
80:20 or 75:25 schemes that make upfront payment to builders. Such schemes are
meant to attract buyers in an otherwise lukewarm realty market. Under such
schemes, buyers need to pay 20% of the full value of the house upfront after
which they don’t need to pay equated monthly instalments (EMIs) for two years.
stocks are coming under selling pressure; Nifty 50 continues to deliver
negative dollar returns. Foreign institutional
investors (FIIs) have a reason to worry because the falling rupee is putting at risk the
$100 billion they have pumped into Indian equities since 2009. Over the
last two weeks, what has surprised everyone is the manner in which “quality
stocks” have cracked. In the worst of times, stocks such as ITC and HDFC Bank have held on
because of their safe haven status. With the rupee’s fall, the dollar returns for foreign investors
have declined meaningfully.
banks include 8 PSUs and three from the private sector. Moody’s said in a statement
that the downgrade reflects the increasing international trend of imposing
losses on holders of sub-debt securities as a pre-condition for distressed
banks to receive government support.
Gold prices suffered the steepest
fall in a week on Thursday falling by Rs1,250 to Rs30,950 per 10 grams in New
Delhi on heavy sell-off by stockists as equity markets and rupee recovered
after RBI’s fresh measures.
The Reserve Bank of India (RBI) on
Thursday allowed cash withdrawals of up to Rs 1,000 a day through prepaid
cards, including gift cards, issued by banks from point of sale terminals, a
move aimed at enhancing customer convenience in using plastic money.
As of now, this facility was
available only to debit cards issued by banks.
"It has been decided accordingly
to offer such a window to the banks to swap the fresh foreign currency
non-resident (banks) FCNR(B) dollar funds, mobilised for a minimum tenor of
three years and over at a fixed rate of 3.5 per cent per annum for the tenor of
the deposit," RBI said in a notification.
The oil minister is grasping at
desperate measures to cut the country's oil costs by nearly $20 billion after
the rupee's slide to record lows has left India facing an oil bill potentially
50 percent higher than on May 1. Oil Minister M. Veerappa Moily has suggested
pricking the ballooning oil bill with everything from a street theatre campaign
encouraging lower fuel use, to shutting fuel stations, to increasing imports
To boost exports, government should
lower cost of export credit.Industry body Assocham suggested that the
government raise investment in agriculture, cut back on subsidies, aggressively
disinvest and roll out tax reforms like DTC and GST to revive economic growth.
Unlike say the economic crisis of
1991, when sovereign debt accounted for a major chunk of India’s external debt,
this time it is corporate debt that is the major contributor to India’s
indebtedness. While external sovereign debt has shrunk to one-fifth of the
total external debt over the past two decades, corporate debt has boomed.
External commercial borrowings accounted for nearly 31% of the total external
debt at the end of fiscal 2013, according to Reserve Bank of India (RBI) data.
Worse, there has been a sharp spike in short-term debt. Short-term debt was
only one-tenth of external debt in March 1991, and rose to 16% in 2007.
The BRICS group of emerging economies will contribute $100
billion to a fighting fund to steady currency markets destabilized by an
expected pullback of US monetary stimulus, Russian President Vladimir Putin said
on Thursday. China, holder of the world’s largest foreign exchange reserves,
will contribute the bulk of the currency pool.
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